A spokesperson for the nationalised bank said: “Jobs from all grades and from all departments could be affected.

The bank started formal consultations with Unite the union and other employee representatives yesterday, which are expected to last a minimum of 90 days. It hopes to complete the job cuts by the end of the year.

David Fleming, national officer at Unite, branded the exercise as “scandalous”, and said that the latest announcement reduces the workforce to under 2,000 – down from the 6,500 employed in 2007.

“This appalling news of 680 job cuts is scandalous. Another round of brutal job cuts is simply a step too far for this workforce.

“Unite will now take our demand for Northern Rock to be returned to mutuality to political representatives. The government must begin to heed the demands for a diverse financial services industry,” said Fleming.

Northern Rock continues to be loss-making, reporting a loss of £232.4m in its full year results for 2010. The results also indicated that the bank would focus on “cost management” in 2011 in order to prepare for a return to the private sector.

“In order to meet our agreed objectives, we must continue to manage our cost base, which is too big relative to the size of the Company - regrettably, this will involve job losses.

“Our aim is to minimise compulsory redundancies where possible and we will offer voluntary redundancy,” said Sandler.

In 2009, government auditors said that poor IT systems at Northern Rock prevented the government from being able to wind down the bank when it became a casualty of the subprime mortgage crisis in 2007.